Puerto Rico Utility Poised to Cancel Grid-Restoring Contract
Puerto Rico plans to cancel a $300 million contract to rebuild the hurricane-ravaged electrical grid.
(Bloomberg) -- Puerto Rico plans to cancel a $300 million contract to rebuild the hurricane-ravaged electrical grid that went to a tiny company based in Interior Secretary Ryan Zinke’s Montana hometown, the head of the island’s power utility said.
Ricardo Ramos, executive director of the Puerto Rico Electric Power Authority, or Prepa, said he will request permission from the utility’s board of directors to end the deal with Whitefish Energy Holdings LLC. The contract stipulates that 30 days of notice is required. Existing work, including on key transmission lines, will continue for now.
Ramos, speaking at a press conference in San Juan Sunday, said the decision to cancel the contract doesn’t imply wrongdoing by the company or in the way the contract was awarded. He said he is “disappointed” and blamed the media and politics for creating a perception of corruption.
“When Whitefish started working, everyone was cheering and clapping,” Ramos, who planned to talk to company officials later Sunday, said. “In the last four days, they’ve been having stones thrown at them.”
States’ Help
The decision comes after Governor Ricardo Rossello asked Prepa’s board to invoke a cancellation clause earlier Sunday. He said Puerto Rico is requesting aid from New York and Florida to replace the expected reduction in repair brigades from the cancellation. Governors from the two states and Puerto Rico have already been in discussion to send workers and equipment to the U.S. territory, according to a statement released Sunday.
“The decision announced today is intended to reaffirm our commitment to transparency in the contracting process in the Government of Puerto Rico and to achieve the highest degree of efficiency possible in the restoration of the power grid of our island in the shortest amount of time possible,” Rossello said in the statement.
About 70 percent of the island was still without power as of Sunday, more than a month after the storm, according to Prepa.
Whitefish, which had just two full-time employees before beginning its work in Puerto Rico, was selected Oct. 19 by Prepa to lead the rebuilding of the grid, with the expectation that the money would come from the U.S. Federal Emergency Management Agency. FEMA is investigating the contract, as is the inspector general of FEMA’s parent agency, the Department of Homeland Security.
Whitefish Response
The company, in a statement, said the cancellation will delay rebuilding of the power grid and said it stood by its work, particularly in remote areas accessible only by helicopter and heavy equipment. About 500,000 residents in San Juan will soon have power back because of Whitefish’s work, it said.
“The original decision by PREPA to have Whitefish Energy come to the Puerto Rico only sped up the repairs, and if it were not for that action, crews would just now be getting to the island to begin the process of rebuilding the system and restoring power,” the company said in the statement.
Whitefish has said its chief executive officer knew Zinke but that the cabinet secretary had no role in the company or its work in Puerto Rico.
Zinke tweeted on Friday that he “had absolutely nothing to do with Whitefish Energy receiving a contract in Puerto Rico. I welcome all investigations into the allegations.” He said he was contacted by the company after the contract was awarded but “took no action.”
Among Whitefish’s investors is the Dallas-based HBC Investments LLC. Joseph Colonnetta, founding and general partner of HBC, along with his wife donated about $70,000 to President Donald Trump’s campaign and the Republican National Committee.
Critical of Corps
Puerto Rico filed for court protection from its creditors in May, giving up on negotiating with voluntary creditors after years of trying to work out a way to restructure a debt load of more than $70 billion. About two months later, officials put Prepa into similar court proceedings after they rejected a longstanding deal with lenders. The island’s fiscal agency told a bankruptcy judge last month the hurricanes wouldn’t derail court proceedings.
Rossello -- who until now has avoided conflict with Trump or federal government agencies -- also used a press conference Sunday to criticize the U.S. Army Corps of Engineers.
He said the Army Corps had pledged to have much of the electrical system operational within 45 days, and about a month into that timeline, only seven brigades were on the ground. Meanwhile, he said two contractors hired by the Army Corps were still in the process of subcontracting. The Army Corps didn’t immediately respond to a request for comment.
“They must understand that this isn’t some jurisdiction somewhere in the world that didn’t have energy in the past and now they’re building it,” Rossello said. “No, this is a jurisdiction of the United States of America.”
Jose Sanchez, director of the Corps’ Task Force Power Restoration, said the Corps understands “the frustration by the governor of Puerto Rico.” The Corps is expediting deliveries of crews, material and equipment to the island, he said in a statement emailed by a spokesman.
--With assistance from Laura J. Keller
To contact the reporters on this story: Brendan Coffey in Boston at bcoffey10@bloomberg.net, Jonathan Levin in Miami at jlevin20@bloomberg.net, Ezra Fieser in Santo Domingo, Dominican Republic at efieser@bloomberg.net.
To contact the editors responsible for this story: Robert LaFranco at rlafranco@bloomberg.net, Bernard Kohn, Mark Niquette
©2017 Bloomberg L.P.